The UK government has postponed a planned 20% rise in the Energy Price Guarantee (EPG) that was due to start in April, keeping typical household energy bills at £2,500 a year for at least three months.
The decision was made to prevent further financial strain on consumers during the ongoing cost of living crisis. Despite the postponement, bills will still rise in April due to the end of the Energy Bills Support Scheme (EBSS), which provided households with £400 in bill support over six months from October to March.
In a recent statement, Jeremy Hunt, the former Health Secretary and current Chancellor, said, "High energy bills are one of the biggest worries for families, which is why we’re maintaining the Energy Price Guarantee at its current level. With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too."
The EPG is effectively a subsidy from the state that caps energy prices for consumers. It will likely cost less than expected due to falling wholesale prices, providing significant headroom to enable the postponement.
On current forecasts, the EPG should be replaced by a lower Energy Price Cap from July, with regulator Ofgem announcing that its price cap would fall by 23% from April to June to £3,280 a year for typical users. Analysts Cornwall Insight predict that the cap could fall even further to £2,013 a year from 1 June and to £2,003 a year from 1 October. As consumers pay the lower of the two prices, the EPG will no longer be needed from July.
In addition, prepayment meter customers will pay less for energy from 1 July, as the Chancellor confirmed in the recent budget that these households will no longer pay more compared to people on direct debits. Despite these measures, concerns remain about rising energy bills and financial pressures on households during the cost of living crisis.